The Washington-based International Monetary Fund (IMF) has reaffirmed its positive outlook on the Philippines, projecting steady economy growth in the coming years and signaling that the Bangko Sentral ng Pilipinas (BSP) has room to ease interest rates further amid falling inflation.

In a statement released on May 22 following a week-long visit to Manila, an IMF mission led by Elif Arbatli Saxegaard said that the Philippine economy remains robust despite ongoing global uncertainties. The multilateral lender maintained its gross domestic product (GDP) growth forecast at 5.5 percent for 2025, with a slight acceleration to 5.8 percent in 2026.

If the IMF’s projection is realized, this year’s GDP growth would be the slowest in five years—since the economy suffered from its worst postwar recession in 2020, at the height of the most stringent lockdowns to contain the Covid-19 pandemic.

The growth forecast for next year, meanwhile, remained below the government’s more ambitious goal of six to eight percent.

“The Philippine economy remains resilient despite external challenges,” said Saxegaard. “While the announced United States (US) tariffs are expected to have a limited direct impact, the higher global policy uncertainty and lower growth in major economies will weigh on growth.”

The IMF noted that headline inflation fell to 1.4 percent year-on-year in April, driven by earlier monetary tightening and the government’s efforts to lower food prices, including the reduction in rice tariffs. Core inflation also eased to 2.2 percent. With inflation expectations “well-anchored” and risks broadly balanced, the IMF said that “the Bangko Sentral ng Pilipinas (BSP) has room to continue to reduce the policy rate and firmly move to a neutral stance.”

The IMF sees the possibility of further monetary easing and lower food prices, coupled with low unemployment, supporting a recovery in consumption.

However, the IMF also highlighted potential risks to this rosy outlook. “Risks are tilted to the downside, driven mainly by external factors but also by the weaker-than-expected outturn in the first quarter,” Saxegaard said.

The IMF projected the current account deficit to narrow from 3.8 percent of GDP in 2024 to 3.4 percent in 2025 due to softer commodity prices. While reserves have declined from their peak in September last year, they remain “adequate” at $105.3 billion as of April this year, it noted.

On fiscal matters, the IMF emphasized the importance of sticking to the government’s medium-term consolidation plan, which involves boosting revenue and improving spending efficiency. “The fiscal deficit declined from 6.1 percent of GDP in 2023 to 5.7 percent in 2024, largely in line with the government’s latest fiscal program. The medium-term fiscal consolidation remains appropriate and should be supported by a sustainable plan to raise tax revenues and implement expenditure reforms,” the statement said.

The IMF also welcomed efforts to enhance monetary policy transmission, including ongoing reforms in financial markets such as the launch of the interest rate swap market and the consolidation of government bond issuance. These reforms “will help enhance monetary policy transmission,” it said.

It likewise acknowledged improvements in the financial system, with systemic risks remaining contained and healthy credit growth. However, the IMF warned that rapid expansion in consumer credit and exposure to real estate sectors should be closely monitored.

Also, Saxegaard reiterated the IMF’s long-term confidence in the Philippines. “The Philippine economy holds significant potential with a sizable demographic dividend and abundant natural resources. The government has been undertaking reforms to reduce infrastructure, health and education gaps, promote foreign direct investment (FDI), and diversify the country’s export markets.”